This afternoon, I listened to a concert of Celtic music on the radio. It included Celtic music from Brittany in western France. Nothing astonishing about it except this: The presentations and commentaries where all in a dialect of Chinese. You have to love California, sickbed of authenticity and cradle of creativity on a world scale.
Liberty
Pure Racism and Chinese Dining
There are several kinds of racism. The roots and the dynamics of racism are among the most interesting sociological issues. Here is a small but important fragment of the whole matter. The most common kind of racism involves three separate mental operations: 1 Assign an individual to a group; 2 Assign certain undesirable features of character or culture to the same group; 3 Assign these same undesirable characteristics to the individual because he belongs to the group.
The most pure form of common racism I know used to make me laugh. Of late, it has begun to annoy me. Here is a relevant story.
I pick up my wife at the airport after a short trip. We go out to celebrate our reunion. My wife wants to eat Chinese food. There is a Chinese restaurant near the airport where I have had excellent dinners in the past. It’s a large and old establishment with many Chinese customers. In fact, every time I have been there, I was with Chinese friends.
We sit down a little early. I don’t like the early bird menu, of course; I don’t like the regular menu either; the “specials” menu is not much more attractive. None of these menus corresponds well with my golden memory of the several original meals I have had there. I ask the waitress if there is a Chinese menu with different dishes than are on the English-language menu. “No,” she says. My wife and I order the less boring dishes from the main menu. Continue reading
African Political Structures: A Debate
I just hooked a big fish on the end of my line when I tweeted about my support for secession of Azawad to Dr. George Ayittey, an economist at American University and one of Africa’s leading lights of classical liberalism. I have a talent for ribbing people in just the right place at just the right time, and the following response I got from Dr. Ayittey confirms my magnificent talent (some may disagree with the label ‘talent’, but I digress).
In response to my support for Azawad, Dr. Ayittey tweeted the following: Continue reading
Coyotes: How Government Bureaucrats Think
In my area of central California coyotes recently attacked two small dogs that were romping around. Both dogs survived. The attack took part in a public park of some sort. The reaction of the rangers (How I hate this semi-heroic designation for cops in green uniforms!) :
We are going to enforce leash laws more strictly. The attack would not have happened if the dogs had been on leash.
Why not regulate coyote behavior while you are it? You might add to the list of forbidden things on the signs posted everywhere:
Coyote attacks on dogs not allowed.
Somewhere in the depths of the bloated California bureaucracy there might even be a subsidized artist to design a cute symbol signifying the same thing, for coyotes who can’t read. While we are at it, why not a sign in Spanish also?
There is another approach to all this: Dogs like to run around. In fact, most of them need to run around to be healthy. Dogs who run are happier than dogs who don’t.
Coyotes will eat anything, small dogs when they get a chance. It makes them happy. Dog owners know this. They are morally responsible for their dogs. They are the ones to decide what’s the greatest risk for their pet: unhappiness and a constricted life vs the risk of a very rare wild animal attack. Continue reading
Native American Sovereignty
I have been a proponent of abolishing, outright, the Bureau of Indian Affairs for a long time. In its place, I would either grant the Indian tribes full-fledged sovereignty with reparations for stolen property, or would grant the reservations statehood into the union of the United States federal republic.
If you’ll notice, this proposal goes hand-in-hand with my other writings on decentralizing political power in other various parts of the world, and I think that the issue of sovereignty for Native Americans goes along nicely with this theme. Tyler Cowen recently directed me to a piece in the Economist that writes about just this topic, so I am not nearly as idealistic and young as some of you might think.
I think this decentralized process is happening for a reason, and that the reason is overwhelmingly good: the world’s markets are becoming increasingly integrated, and as a result, political power is becoming increasingly irrelevant except on a largely local or regional scale.
If we want to avoid the mistakes of the past, including slavery and horrific, large-scale wars, then we would do well to realize and affirm that decentralized governance and integrated markets are extremely beneficial to mankind. In affirming this, we would likewise do well to recognize that when people want more autonomy in governance we should grant it to them, especially in cases where post-colonial states exist. States themselves are largely illegitimate, and the post-colonial ones are the most guilty of this crime. There is no reason to pretend that we have to respect the sovereignty of post-colonial states ruled by dictators, and every reason to respect the wishes of large swathes of the people in these post-colonial states for more political autonomy. Continue reading
How ’bout Communism?
Note: Most of my adult life and all of my childhood were dominated by the threat of Communism. People of my generation who wanted to know understood well the horrors of Communist societies. We knew of the slave-labor camps, of the mass executions, of the constant spying on ordinary citizens by the secret police, of the betrayals of friend by friend that were everyday life in Communist countries. We were well aware also of the grinding poverty in those countries.
I am concerned that thinking individuals who are in their twenties and even in their thirties now might know little about the reality of Communism as it was practiced. It seems to me that no one asked them to study the matter. A Russian friend of mine is going back to Russia this summer for a couple of months. If a few readers ask, I will request of my friend that he contribute to this blog from there, drawing on the memories of older friends and relatives who survived the Soviet period.
There was once a “Communist” movement whose followers were often motivated by generous impulses and by economic ignorance, in more or less equal parts. There has never been a Communist state, whatever that would be. Historically several Communist parties did achieve political power. None did so through democratic means, although the Czechoslovak Communists may have come close, in 1948. We will never know because the presence of a large contingent of the Soviet Red Army in the country forever mars the analysis. Continue reading
Mali: Let It Collapse, Duh! Part 2
I just came across an article in the New York Times via Bill Easterly, and it is very discouraging. The article is, of course, about the aspirations of Azawad, the breakaway region of Mali that just declared its independence. The article outlines the slim-to-none chances Azawad has of breaking free from the shackles of colonial legacy and African despotism:
“[…] there is little likelihood that anyone will defeat the Tuaregs on the battlefield anytime soon.
Still, they face slim odds of establishing a nation. Just ask Ahmed Abdi Habsade, a government minister in Africa’s other unrecognized state, Somaliland. ‘We have many problems,’ Mr. Habsade said in a telephone interview from Somaliland’s capital, Hargeysa. ‘The country cannot get donations from the U.N. or other governments. We are not having a budget to develop our country.’
Somaliland, which sits in the northwestern corner of Somalia, has been a de-facto independent nation for the better part of two decades, and an oasis of calm in the chaos that has swept up Somalia. Its claims to independence date from the colonial era, when it was a British protectorate while Somalia was controlled by Italy. The two states merged after independence, but the Somalilanders had almost immediate regrets, and have been trying to break free ever since.
Somaliland has had successes, including holding peaceful elections, yet it has struggled without an international stamp of Continue reading
Protectionism and Job Loss: Part Nine of a Nine Steps Series (And Last, I Think.)
This is the last installment of a series of nine short essays in which I attempted to explain a topic that is both important and misunderstood by many intelligent people: protectionism and its obverse, free trade.
[…]
When economic actors, people and organizations, switch from doing what they don’t do very well to what they do better, production increases everywhere, the pie gets bigger. There is no injustice involved, just a general rise in the standard of living.
For such virtuous change to achieve maximum effect, there must be economies of scope and scale. It’s not always obvious in big countries such as the US which has a large internal market (many people most of whom are rich by world standards.) It’s pretty clear when you think of small prosperous countries such as Switzerland. How efficient would Nestlé be if it made chocolate only for eight million Swiss rather than for hundreds of millions of consumers worldwide? And would the smelters of Luxembourg do a good job making steel only for the half-million Luxembourgers?
So, it stands to reason that any barrier to import limits severely the benefits of switching from mediocre to good or from good to excellent. But, the basic rule of international trade is reciprocity. (It’s a little more complicated than this in everyday life but the complications do not affect the basic soundness of my reasoning.) Countries’ governments say to each other: “ If you impede the entry on your territory of stuff made by my economic actors, I will impede access of my territory of stuff made by yours.” This is no bluff. So-called “trade wars” erupt frequently, involving different kinds of tit-for-tat. The most notable thing about every round of tit-for-tat is that it impoverishes everyone. See above.
Trade barriers, different ways of impeding access, come and go. Although it’s difficult to find a coherent argument in favor of any trade barrier, governments will often yield to interest groups and provide “protection” from imports for this or that good. They do so usually not because of some abstraction such as the “national interest,” but because of political necessity or to distribute political favors. Two interesting remarks about this poisonous practice. First, more democratic governments should be expected to be more likely to yield such favors. Second, by “protecting” domestic producers, they also lower the standard of living of domestic consumers. Naturally, the two categories of consumers and domestic producers overlap somewhat which only underscores the absurdity of protectionism. Incidentally, developing and enforcing trade barriers requires a large technical and inspection apparatus. The more trade barriers, the larger the government relative to the national economy.
All this being said, it’s clear that the removal of trade barriers will cause job losses in the affected sectors of the economy. It’s also obvious that some of those who lose their jobs will not find equivalent or better jobs. Here, individual fates diverge in small but humanly significant ways from collective well-being.
Let’s take the case of Canadian vintners. Yes, they exist. Would I make up anything so absurd? Do I have sufficient imagination? As you might imagine, Canadian wine-producing firms exist inside a network of government protectionist measures. If they were left to their own devices, most would soon be swept away by the wines of thousands of producers from twenty different places, from California to South Africa. Now, imagine that the Canadian vintners lose their muscle with the Canadian federal government and that all the protective measures are withdrawn within one year.
Under such a scenario, two things would happen. First, as I have explained step by step, many Canadian resources, including labor would eventually be switched to more productive endeavors. Because of this switch, Canadians in general but also the whole world would be a tad richer. But no one would expect the switch to be instantaneous. There would be some social dislocation, for sure.
The second consequences would be, starkly, that some people working in wineries and in wine-related businesses would lose their jobs. The fifty-five year old wine-maker of a small British Columbia winery with thirty years experience in the same winery would almost certainly have to retire. It’s extremely unlikely that he would qualify for one of the many advanced jobs open in the new, and now marginally more productive Canadian economy. An old wine-maker will not become say, a software writer, under almost any imaginable circumstance. Instead, the middle-aged wine maker will either become unemployed or he will have to take one of the lower-end jobs freed by the escalators described before.
Free trade, and opposition to protectionism have acquired a bad name, I think in part because of economists’ reluctance to face squarely this particular human implication of such policies.
I defend free trade while recognizing the wine-maker’s painful problem by pointing to the overall, collective consequences of protectionism: It’s always an economic disaster. We know this from two different sets of observations, First, other things being equal, countries that follow national policies of free trade grow faster than those that don’t. That’s true equally for poor countries and for rich countries. Similarly, when countries that have implemented protectionist policies open up even a little, they experience a quick surge in their GDP. Second, there is no part of the world where unemployment figures track free trade’s ups and downs. As an example, the sudden upsurge of unemployment in the US 2007-2009 had nothing to do with any increase in imports. This tells me that the sad middle-aged Canadian vintner’s case does not account for much of unemployment.
Other things being equal, I think it’s better to be unemployed in a relatively more prosperous country that in a poor one. The benefits are more generous, and the next job opportunities richer and more varied. Training programs are also more common and more accessible in richer than in poorer countries. And capital to start one’s own business is normally cheaper and more accessible, the more prosperous the country. I will go further: Economically, it’s better to be unemployed in a rich country than employed in a poor country. (I understand there are non-economic downsides to unemployment. This is another topic I can’t deal with here. A single thread, the economic thread, is difficult enough to follow.)
In conclusion to this whole series on free trade and protectionism in nine small steps: protectionism remains the royal road to collective poverty and it does not do much for anyone, not even for those who stand to lose their jobs when national borders open.
[Editor’s note: Part 8 can be found here]
Ron Paul to Visit UCLA
To all you Angelinos, Ron Paul will be in Westwood tonight at 8:30 pm.
Here is the link to free registration. Hope to see you all there!
The Escalators (Part Eight of Eight so Far on Protectionism)
Ninth and probably last installment soon: Do people lose their jobs because of free trade?
In the story in seven episodes some of you had the patience to read, I kept pushing aside the question of what happens to the work done by those who move upward. If you will recall, I abandoned half of my dish-washing work, Luis stopped blowing leaves and carting away garden leavings, and Hans quit his sandwich-making job. Of course, those are bottom jobs garnering the lowest pay. So, the easiest and most general answer is that people and organizations move upward is they are allowed to do so. Both individuals and organizations become more productive. Under even moderately competitive conditions, this means that they earn more money.
The question arises toward the bottom of the pyramid of productivity, as in my story. I mentioned briefly that the answer has to do with escalators. There are four answers to this question that are not mutually exclusive. I mean by this that you can witness all four solutions being implemented in the same national society at the same time. I take them up in turn.
1 Some of the lowly jobs remain undone. This is so rare that it’s difficult to come up with examples that are not so exotic as to be distracting.
2 Within almost all national societies, a combination of unemployment and of under-employment is the rule. In poor societies, many people don’t work much because there is no work for them. (That’s one of the main sources of underdevelopment: people don’t work much.) In rich societies, there is a reliable rate of unemployment in the potential labor force. some of which is voluntary. In such societies, there is also massive under-employment of young people, of older people and of women. When dishwashers are leaf-blowers are hard to come by, wages rise and some of the unemployed and some of the under-unemployed become motivated to do them. That’s true in both rich and poor societies.
3 If the shortage of dishwashers and of leaf-blowers becomes severe enough, history tells us, the miracle of mechanization revs up. Within a short time of a labor shortage of olive pickers in the northern Mediterranean countries, someone invented and effective olive-tree shaking machine. It is driven by a single person and replaces the work of about half a dozen hand pickers. Here is another telling anecdote. Everyone knows that the French love dogs better than they love children, with the kind of results for the sidewalks you might expect. I have seen with my own eyes, within a few years, small armies of low-skill African immigrants armed with twig brooms disappear from the streets of Paris. They were replaced by extraordinary, powerful motorcycles with booms extending ten feet on each side. The booms support both powerful jets and rotary brushes. The uniformed city employees who drive them on the sidewalks have the serious mien and they show the pride of sea-captains. Incidentally, workers who control machinery usually earn more money that those who rely on primitive hand-tools.
4 There are huge reserves of able-bodied men and women in the less developed countries ready to jump at the opportunity to wash dishes in my stead and to take over Luis’ leaf blowing. (That’s how Luis came to California in the first place.) Of course, immigration is often controversial, for a variety of reasons, but in pure economic terms, the case for the free movement of labor is bullet-proof. And, yes, ideally, the reserve of third world labor is ultimately finite but I am not going to worry about this for the next hundred years.
All in all, the answer to the question of who will do the work of those who move upward, is that there are several escalators that take care of almost all of this problem.
[Editor’s note: Part 7 can be found here. Part 9 can be found here]
Economies of Scale and Economies of Scope, Bane of Protectionism. (Part Seven of Seven so Far. More Coming.)
Because I have decided to go one little step at a time, there are six previous installments of this series. All comprise the word “protectionism” somewhere in their titles.
Because, we are all richer, Luis, I , the Quebec farmer and Pierre are in a better position to buy German manufactured goods than we were before. In Pierre’s case, that could be a Mercedes (although what he really wants is a specific Japanese car). In the Canadian farmer’s case, it could also be a Mercedes, or a BMW motorcycle. In Luis’s case and in mine, it would be a small piece of either a Mercedes or a BMW motorcycle. All the same, it’s a start.
I, and Luis, and Hans, and Pierre are all more likely to buy a basket or two of organic raspberries than we were before.
If Pierre follows through with his intention to send his son to a pricey MBA program in the US, it could be in my area. The son will go to restaurants once in a while, on his newly rich father’s dime, of course. More dishes for Luis to wash.
It’s not obvious that my main occupation, selling at the flea market will improve at all, except through Luis, of course. Remember he earns more money. He might spend some of it buying a ten-dollar used bike from me at the flea market. Pierre’s son, studying for an American MBA, might buy a used desk from me at the flea market, making me richer.
Now, we need to make a small, very modest technical switch. Here is a generalization that is more often valid than not: The more you make or sell of something the lower the cost of making it or of selling it. A lower cost of something is equivalent to a pay raise for the consumer, or for the producer, or for both. The technical terms here are “economy of scale “ (production) and “economy of scope” (marketing defined broadly). Continue reading
Two More Days!
Two more days to sign up for the Independent Institute’s summer seminar scholarship offer.
I first became interested in libertarianism during the 2008 presidential campaign, when Ron Paul gained national prominence for his tangle with Rudy Giuliani on foreign policy. In the summer of 2009, just after the presidential primaries wrapped up, I embarked on a nationwide journey to learn more about the concept of liberty.
My first stop was the Independent Institute’s summer seminar, an from that experience I not only learned a lot about how markets work (I just spent the afternoon going over my notes from the seminar), but I was also able to make some great connections as well. Indeed, the co-editor of this blog, Fred Foldvary, was a lecturer at the seminar, and Brian Gothberg, who is incredibly good at teaching basic economic subjects, are just some of the fantastic people that I have been able to count over the past three years for intellectual support.
If you want to spend a week in one of the San Francisco Bay Area’s most beautiful locales, learning about liberty, history, civil society, and the market process, then I highly suggest checking out their seminar. It is absolutely fantastic.
National Specialization, the Virtuous Obverse of Protectionism (Part Six of a Series)
Luis, I, the Canadian farmer, Hans, and Pierre have all improved our productivity. We all earn more. We have increased our ability to buy anything at all, stuff, leisure, occupational training, or anything we want. We did this without working more than we used to. We have helped the world become richer. None of us, except maybe Pierre, has achieved any stupendous success. Even Pierre’s bold killing on the Chinese wine market ranks far below other successes we read about in the newspaper everyday. His success barely rates the local newspaper. It’s not Google, or Apple, or Craig’s List or even Fred’s List. It’s pretty conventional stuff.
We have all done this without cheating, without despoiling anyone, without doing any damage to anybody. Now think of what we have not done: I have not improved my technical ability; it’s doubtful whether Luis has done anything of the sort. In fact, it would not be absurd to argue that blowing leaves is more skillful than washing dishes. Same for the Quebec farmer. Hans may have augmented his training; he did it on the job if he did it at all, at the expense of his manufacturing employer. Pierre knows more than he did when he was still at his hum-drum government job. He learned what he learned under his own power, on his own dime, at no perceptible cost to anyone else. Here is the main factor that accounts for our joint improved production: Continue reading
Equal self ownership
John Locke in his Second Treatise of Government had two premises for natural moral law: independence and equality. Independence means that we think and feel individually. Equality is about moral worth. There is no inherent master/slave status in human nature. There is no inherent superiority or inferiority among the races, sexes, or other categories of human beings. The moral default is therefore equality.
This is the concept recognized by Thomas Jefferson, when he wrote that all persons are created equal. This is the concept of equality before the law. Human equality is a premise for natural moral law, or the universal ethic.
When one person imposes coercive harm on another, he makes himself master, and the other is a slave. This is inconsistent with equality. The universal ethic begins with our subjective values, and then provides a moral production function resulting in moral rules for the universal ethic. One’s personal ethic or subjective value that being coercively harmed is evil gets passed as a universal ethic moral rule that coercive harm to others is evil. But mere offense becomes transformed as morally neutral, since one has not been invaded.
For the full treatment, see my book The Soul of Liberty.
Notes On Liberty 